ENTREPRENEURSHIP

(BPK 20802)

CHAPTER 2:

SCREENING BUSINESS
ENVIRONMENT

DR. HJH. ROSLINDA ALI

FAKULTI TEKNOLOGI KEJURUTERAAN
CONTENTS
What is a business environment?

Techniques for screening new business

Finding the gap in the market

Analysing business ideas feasibility analysis

INTRODUCTION
Business opportunity recognition is considered as the first
critical step in starting a new business (Kirzner, 1979)

Business opportunity should comprise three important

characteristics (Baron, 2006):
1. Potential economic value (generate profit);
2. Newness (product did not exist previously); and
3. Desirability (moral and legal acceptance of the new
product)
STEPS TO SELECT NEW
VENTURES

STEP 4 Select one which is suitable to the

entrepreneur and develop business
concept

STEP 3 Analyse specific opportunities which

are feasible to venture

STEP 2 Screening environment, evaluating

self, community & society, value and
culture of the potential target group

STEP 1 Identify customers needs and wants

STEP 1:
IDENTIFY CUSTOMERS NEEDS AND WANTS

Needs & Wants

Products Services
Needs:
Something basic which
people must have. E.g.:
Something physical
clothing, house, food, health, Non-physical but able
which can satisfy
basic education, protection, to fulfil customers
customers needs
etc. needs and wants
and wants
Wants:
Desire to have more than
basic needs. Wants will be
fulfill after the basic needs
were fulfilled. E.g.: cars,
bigger house, traveling, golf
club, latest fashions, etc.
 STEP 2:
Screening environment, evaluating self, community &
society, value and culture of the potential target group

Analyse

Environment Self Community

Population structure,
income, taste, preference Experience Norm
Country imports and Knowledge and
exports skills
Local resources and new Financial standing
technology Interest
Industry linkages Networking
Government and private
development projects
Global and regional
development
Current issues, social,
rules and regulations
STEP 3:
Analyse specific opportunities which are feasible to
venture

Legal perspective

Market competition level

Funding

Technology availability
Analyse
Raw material supply

Expertise & manpower

?
Logistic
Feasibility Sustainability

Risks level
STEP 4:
Select one which is suitable to the entrepreneur and
develop business concept

Market competition level/

marketing plan

Operational plan
- Technology, supply chain

Organisational &
Analyse administration plan
- Expertise and manpower

Funding

Viability
? - Working capital
- Fixed assets

Profitability
- ROI, ROE, pay back, cash
flow, risks level
STEP 4: (cont.)
Select one which is suitable to the entrepreneur and
develop business concept

New venture selected

Prepare detailed business

plan

Plan execution

Monitor and improvement

EXAMPLES OF BUSINESS
OPPORTUNITIES
Agriculture

Forestry Fishery Plantation Poultry

Veneer plywood Fishing Clearing Poultry farming

Logging equipment plantations Processing
Furniture Deep-sea Planting Wholesale/
Sawn timber fishing Processing supplies
Fish processing Wholesale/
Wholesale/ distribution
distributions nursery
BUSINESS ENVIRONMENT
Business environment consist of all those factors that
have a bearing on the business.

It implies those external forces, factors and

institutions that are beyond the control of individual
business organisations and their management and
affect the business enterprise.
BUSINESS ENVIRONMENT (cont.)

BUSINESS
ENVIRONMENT

External Internal
factors factors

Macro Micro
environment environment
EXTERNAL FACTORS
MACRO ENVIRONMENT

Is the external factors that cannot be controlled

but affect the decision-making, performance and
organisations strategy.

Affect the long-term decision-making of an

organisation.
MACRO ENVIRONMENT (cont.)

Factors influencing macro environment:

1. Political factors

2. Economic factors

3. Social factors

4. Technological factors

. This is also known as PEST analysis

PEST analysis
FACTORS: DESCRIPTIONS:
Political stability
Tax law
Political
Employment law
Trade restrictions and tariffs
Environmental regulations
State of the economy
Interest rates
Economic
Exchange rates
Inflation rates
Role of men and women in society
Division of wealth in society
Social
Health and safety
Population growth rate
Rate of technological change
Automation
MICRO ENVIRONMENT

The micro environment affects the organisation

directly. It refers to the environment that most closely
linked to the firm.

This environment is also not under the full control of

business.

The business can influence this environment

MICRO ENVIRONMENT (cont.)

Components in micro environment:

1. Customer

2. Supplier

3. Competitor

4. Marketing intermediaries

5. Public
MICRO ENVIRONMENT (cont.)
Components Descriptions
Customers are the actual buyer of our
goods and services
Customer The company must study its customer
market closely since each market has its
own special characteristics
Suppliers are firms and individuals that
provide the resources needed by the
company
Suppliers
They are an important link in the
companys overall customer value delivery
system
Conducting competitor analysis is critical
for success of the firm
Competitors
A marketer must monitor its competitors
MICRO ENVIRONMENT (cont.)
Components Descriptions
Marketing intermediaries are firms that
Marketing
help the company to promote, sell, and
intermediaries
distribute its goods to final buyers
A public is any group that has an actual or
potential interest in or impact on an
organisations ability to achieve its
Public
objectives
A company should prepare a marketing
plan for all of their major publics
INTERNAL FACTORS
INTERNAL ENVIRONMENT

The internal environment is the environment that has

a direct impact on the business.

The internal factors are generally controllable

because the company has control over these factors.

It can alter or modify such factors as its personnel,

physical facilities, and organisation and functional
means, like marketing, to suit the environment.
INTERNAL ENVIRONMENT (cont.)

Among the factors from inside the firm that could

affect performance:
Finance available without money the firm may
not be able to do what they wish
Ability of staff the more capable staff , the more
productive they will be
Information available the better the
information, the better the decisions made
SWOT ANALYSIS
A SWOT analysis is a planning tool used to understand the
Strengths, Weaknesses, Opportunities, and Threats
involved in a project or in a business.

It involves specifying the objective of the business or project

and identifying the internal and external factors that are
supportive or unfavourable in achieving that objective

SWOT is often used as part of strategic planning process.

SWOT ANALYSIS (cont.)
Strengths Weaknesses

- INTERNAL FACTORS

Opportunities Threats

- EXTERNAL FACTORS -
SWOT ANALYSIS (cont.)
Strengths
What do you do well?
What are your unique skills?
What expert or knowledge do
you have?
What experience do you have?
What do you do better than
your competitors?
What are your most profitable
business?
Opportunities
What are the business goals
you are currently working
towards?
How can you do more for your
Weaknesses
In what areas do you need to
improve?
What resources do you lack?
What parts of your business
are not very profitable?
Where do you need further
education and/or experience?
What costs you time and/or
money?
Threats
Whats going on in the
economy?
Whats going on in the
industry?
SWOT ANALYSIS MATRICS
TOWS Analysis is the analysis of Threats, Opportunities,
Weaknesses, and Strengths.

The 4 strategies derived from this analysis are as follows:

1. Opportunity-Strength (OS) Strategies
2. Opportunity-Weakness (OW) Strategies
3. Threat-Strength (TS) Strategies
4. Threat-Weakness (TW) Strategies
SWOT ANALYSIS MATRICS (cont.)
Strengths Weaknesses

List of strengths List of weaknesses

Opportunites Opportunity- Opportunity-

Strength (OS) Weakness (OW)
Strategies Strategies

List of opportunities Use the strengths to Overcome

take advantage of weaknesses by
opportunities taking advantage of
opportunities
Threats Threat-Strength (TS) Threat-Weakness
Strategies (TW) Strategies

List of threats Use strengths to Minimise

avoid threats weaknesses and
avoid threats
EXAMPLE OF SWOT ANALYSIS
Example on the Campbell Soup Company that stresses
financial goals.

The example also illustrates how you can pair the items
within SWOT grid to develop strategies
 Strengths Weaknesses
Current profit ratio Legal suits not
increased resolved
Employee morale Plant capacity has
high fallen
Market share has Lack of strategic
increased management system

Opportunites Opportunity- Opportunity-

Western European Strength (OS) Weakness (OW)
unification Strategies Strategies
Rising health Acquire food
consciousness in company in Europe Develop new
selecting foods (S1,S3,O1) Pepperidge Farm
Demand for soups Develop new healthy products (W1,O2,O3)
increasing annually soups (S2, O2)

Threats Threat-Strength (TS) Threat-Weakness

Strategies (TW) Strategies
Low value of dollar
THANK YOU